(Yicai) March 4 -- China can further increase its tax on tobacco products in an effort to curb smoking, according to a professor at the University of International Business and Economics.

The Chinese government raised the consumption tax on tobacco to 56 percent from 52 percent of retail prices in 2015. As a result, the average cigarette retail price rose 11 percent from 2014 to 1016, with sales plunging 7.8 percent and tobacco revenue surging 14 percent, according to studies.

China's tobacco system is complex, as there are taxes on tobacco leaves, value-added taxes, and consumption taxes. With the ongoing tax reform, VAT rates were cut, indirectly lowering the overall tax on cigarettes to about 51 percent of the retail value.

"Theoretically, there is still room to further increase taxes on cigarettes," Zheng Rong said during a tobacco control and health seminar on Feb. 28

In high-income countries, tobacco's price elasticity of demand is about minus 0.4, meaning that a 10 percent price hike would lead to a 4 percent decrease in demand. In China, the figure is about minus 0.7 percent.

"This indicates that raising tobacco taxes, and prices in turn, can produce an immediate and significant reduction in consumption and demand," Zheng noted.

Since signing the World Health Organization Framework Convention on Tobacco Control in 2005, China has gradually advanced tobacco control. The smoking rate among people aged 15 and above dropped to 24.1 percent in 2022 from 28.1 percent in 2010, with the male smoking rate declining to 45.3 percent from 52.9 percent, according to the latest official data.

"The decline in smoking rate has slowed,” Xiao Lin, director of the Tobacco Control Office at the Chinese Center for Disease Control and Prevention, said at the seminar. “China's smoking rate still needs to drop 4.1 percentage points more to meet the 2030 target.”

However, China's smoking control efforts may be impacted by the country's latest tax reform proposed by the State Council last year, which would shift the collection of tobacco consumption taxes to a later stage and decentralize revenue to local governments.

Zheng warned that allowing local governments to collect tobacco taxes may interfere with tobacco control and pricing policies. She believes that if tax revenue is moved from the production to the wholesale stage, local governments may not have enough incentives to enact smoke-free legislation.

The consumption tax revenue from products like tobacco and alcohol should not be allocated to local governments because this would incentivize them to boost and not reduce sales of such goods, according to Xu Guihua, senior tobacco control expert.

Editor: Futura Costaglione